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Ireland, Mired in Crisis, Will Dissolve Parliament

LONDON — Two months after Ireland joined Greece in accepting an international bailout for its debt-wracked economy, the political reckoning for the Dublin government entered a decisive phase on Friday with the announcement that Parliament would be dissolved on Tuesday ahead of a general election.

No date for the election was set, but aides to Prime Minister Brian Cowen, whose political career has been effectively ended by the financial crisis, indicated that the likely day was Feb. 25. The vote will come a year earlier than normal in the Irish political calendar, forced by what has amounted to a meltdown of the Cowen government’s authority as Ireland has plummeted from a decade of unprecedented boom to the brink of bankruptcy and a $114 billion international bailout.

If recent opinion polls are a guide, the Fianna Fail party, which replaced Mr. Cowen as its leader on Wednesday with the former foreign minister Micheal Martin, faces a stunning election defeat. The polls have shown the party with less than 20 percent support among voters, down from 42 percent at the last general election in 2007, a showing that would probably cost it half or more of the 72 seats it currently holds in the 166-seat Dail, the lower house of Parliament.

A repudiation on that scale would stand as a warning to other European governments like Portugal and Spain that are struggling with huge amounts of debt and seen as possible candidates for the harsh economic medicine accepted by the Cowen government: an international bailout tied to a domestic austerity program imposing steep tax increases and government spending cuts.

Ireland’s course to the election was cleared on Thursday when lawmakers in the Dail approved a finance bill that included elements of the Cowen government’s austerity package that had not previously been approved, including income tax increases for the country’s two million-strong work force, up to an effective rate of 41 percent for many middle-income earners. Parliament had previously approved steep cuts in the minimum wage, welfare benefits and cabinet ministers’ salaries, an increase in school fees, and a raising of the state pension age.

Until almost the end of parliamentary debate on Thursday night, there were doubts that the finance bill would pass. That it did was thanks to a last-minute concession by the Cowen government; it accepted an amendment that would impose a 90 percent tax on bonuses paid to the employees of any of the Irish banks that turned to the government for state guarantees running into the tens of billions of dollars after a bank-fueled property boom collapsed. It was the property boom that underpinned Ireland’s rise to one of Europe’s richest economies from the mid-1990s, and its collapse precipitated the economic crisis that necessitated the bailout.

The Cowen government had proposed but quickly dropped the 90 percent tax in December, after the Anglo-Irish bank, beneficiary of a $5 billion taxpayer bailout, announced that it intended to pay out more than $50 million in bonuses to more than 2,000 of its employees.

Irish political commentators have predicted a sweeping win in the election for two opposition parties expected to govern in a coalition, the right-of-center Fine Gael party and the left-of-center Labour Party. The favorite to succeed Mr. Cowen as prime minister is the Fine Gael leader, Enda Kenny. The two opposition parties have talked of a possible attempt to renegotiate the terms of the international bailout if they come to power, with some hard-liners suggesting that Ireland should play a doomsday card, threatening to default on its international bank debts if the bailout’s terms are not eased. But with nearly $7 billion of the bailout money already feeding its way into Irish finances, European officials have said that no renegotiation will be accepted.

For Mr. Cowen, 51, the last weeks in government have been tumultuous, culminating last weekend in his being forced by disintegrating support within Fianna Fail to abandon his bid to hang on as party leader, and to lead it into an election.

After three years as prime minister and four years as finance minister before that, he has been blamed by many of Ireland’s political commentators as the man principally responsible for the failure to rein in the property speculation that led to the financial bust. He has said that Ireland was overwhelmed by an international banking crisis that no Dublin government could have controlled.

His successor as Fianna Fail leader, Mr. Martin, 50, is a quiet-spoken politician with a style sharply different from that of the often pugnacious Mr. Cowen.

Mr. Martin won an easy victory in a party contest over his main opponent, the current finance minister, Brian Lenihan, and pledged to mount a grass-roots effort to rebuild Fianna Fail, which has governed Ireland for most of its existence as an independent republic.

In an acceptance speech, Mr. Martin vowed to root out the corruption that brought down a succession of Fianna Fail leaders who served as prime minister in recent years, saying the party’s future lay with “ordinary people who work in the communities and take nothing from politics.”

A version of this article appears in print on January 29, 2011, on page A4 of the New York edition with the headline: Ireland, Mired in Crisis, Will Dissolve Parliament. Order Reprints|Today's Paper|Subscribe